SummaryA second reconciliation package could include significant drug pricing reforms as a means to pay for permanent coverage expansion and other top priorities.
On March 11, President Biden signed the American Rescue Plan Act of 2021 (H.R.1319) into law. Given their razor-thin majority in Congress, Democrats pursued the bill via a special budget process known as reconciliation, which requires only a simple majority vote in both the House and Senate. This legislative vehicle is limited to provisions that directly impact federal spending or revenue, with the Senate parliamentarian serving as the key arbiter of the various legislative, budgetary, and procedural requirements that reconciliation bills must meet (often referred to as the Byrd Rule). These limitations on a reconciliation bill often impact which policies are ultimately enacted through this expedited process.
Given a number of major pandemic, healthcare coverage, and infrastructure priorities that Congressional Democrats would like to pursue, it is widely expected that a second reconciliation package is on the horizon. To offset the high cost of such reforms, the next reconciliation package will likely include much-anticipated drug pricing reforms with significant impacts for manufacturers, plans, and patients.
Looking ahead to the outlook for drug pricing reforms in 2021, here are 3 key considerations:
- Congress will likely seek “pay-for” policies that could include drug pricing reforms. The American Rescue Plan included temporary coverage expansions (e.g., increased exchange coverage subsidy eligibility) that expire in 2023. President Biden and Congressional Democrats will likely seek to make these changes permanent to avoid the political ramifications of individuals losing coverage shortly after a midterm election. As part of a second reconciliation package, drug pricing reforms that demonstrate federal savings according to the Congressional Budget Office could be leveraged as “pay-fors” to offset the significant costs of more extensive coverage expansion.
- “Pay-for” policies may include inflation-based rebates and Part D redesign, among other reforms. Given the recent, in-depth focus on drug pricing reform, Congress will likely turn to key provisions included in the previously proposed H.R.3 and the Prescription Drug Pricing Reduction Act such as inflation-based rebates and Part D benefit redesign. Other drug pricing policies that could also be considered include Part B reimbursement changes, including copay coupons in Average Sales Price calculations and drug waste rebates. Notably, the majority of these proposals have the potential to increase manufacturer liability.
- While drug pricing reform can be executed through legislation, it can also be pursued through regulatory avenues. As the Biden administration takes shape, the drug pricing debate is likely to reignite at the agency level. Most prominently, President Biden has expressed an interest in pursuing drug pricing “negotiation” in Medicare. However, with slim Democratic majorities in Congress and complex mechanisms for implementation, Medicare price negotiation is a less likely candidate for reconciliation. Drug pricing negotiation could be implemented using international reference pricing, creating a new or leveraging an existing health technology assessment body, or creating a novel definition of value for drugs. As agency leadership is finalized, stakeholders should monitor potential activity emerging from the Center for Medicare & Medicaid Innovation, particularly activity related to defining the pathway for price negotiation.
Planning for the Future
Stakeholders should understand the impact of potential drug pricing proposals as Congress moves forward with a second reconciliation package and federal agencies start to take shape. Avalere’s expertise and analytical capabilities can assist with strategic planning for the various policy scenarios that may be a part of a second reconciliation package and analyzing the impact that potential “pay-for” drug pricing reforms may have.
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